According to Financial Times News, S&P Global Ratings just slammed Tether’s USDT stablecoin with its rock bottom stability assessment. The world’s most popular stablecoin, with $174.4 billion in circulation as of September, now faces serious credibility questions. Tether’s collateralization weakened to 103.9% from 106.1% a year earlier, with only 64% of reserves in safe short-term US Treasury bills. Even more concerning, higher-risk investments like corporate bonds and crypto jumped to 24% of reserves, up from 17% last year. Bitcoin alone now represents 5.6% of USDT reserves, exceeding the 3.9% overcollateralization margin. The rating agency flagged Tether’s secrecy, lack of auditor reports, and relocation to El Salvador’s lax regulatory environment as major red flags.
The transparency disaster
Here’s the thing about Tether – they’ve made everything unnecessarily complicated. Instead of proper audited financials, they use BDO Italia for quarterly snapshots. There’s no official confirmation about who holds their Treasury bills, no disclosure about counterparties, and no public information about asset segregation. They’ve even split into four divisions to make punts on random companies like video platform Rumble. Why all the secrecy when they’re sitting on $188 billion in deposits paying zero interest? It’s like they’re trying to hide something.
The Bitcoin gamble
This is where it gets really concerning. Tether now holds enough Bitcoin that if the crypto market tanks, their reserves could become undercollateralized. We’re talking about 5.6% of their entire reserve value in Bitcoin – that’s massive for something supposed to be stable. Combine that with other risky assets, and you’ve got a recipe for disaster. There’s no contingency plan disclosed for if these assets lose value. Basically, they’re gambling with money that’s supposed to be rock-solid safe.
Running to lax regulation
Tether’s move to El Salvador this year tells you everything you need to know. The National Commission of Digital Assets there only requires 1:1 backing and 70% liquidity within 30 days. No asset segregation requirements, no strict oversight. Compare that to what US or European regulators would demand – it’s night and day. They’ve also made it ridiculously hard for regular people to redeem USDT directly, requiring $100,000 minimums and verification fees. Everyone else has to hope secondary markets don’t freeze up.
Why you should care
Look, Tether is the third-most valuable cryptocurrency overall and the backbone of much crypto trading. If USDT were to face a crisis of confidence, it could trigger massive selloffs across the entire crypto market. The fact that they’re chasing higher returns instead of parking everything in safe T-bills shows where their priorities lie. They could be making $8 billion annually risk-free, but instead they’re gambling for maybe twice that while everyone questions their stability. For anyone using Tether for trading or holding it as a stable asset, this S&P report should be a massive wake-up call. The crypto ecosystem’s stability depends heavily on stablecoins actually being stable, and right now, the biggest one looks anything but.
